Inflation, Deflation or Goldilocks? Bond Market Makes No Decision Yet

Just a post to touch base with the most important market on earth, the US bond market which, along with a lot of other indicators (like for one example, Copper’s struggle with $3/lb.) * will eventually indicate for us ‘inflationary?’, ‘deflationary?’ or ‘Goldilocks?’

At yesterday’s close the 10-2yr yield curve was in a long-term flattening trend but bouncing. It has actually not flattened further since December and that could be a negative divergence to the big relief rally in the stock market.

yield curve

The 30-5yr is up today after holding trend yet again.

30yr yield/5yr yield

The 10yr Treasury Note has held trend as well, despite the big rally in risk ‘on’ markets. A lingering issue here is that the bond is still not contrary bullish from the sentiment views of public optimism and CoT.

10 year treasury note

So again, the bond can drop (yields rise) and that could drive the yield curve to steepening. That’s an inflationary scenario.

The bond can rise with the yield curve also steepening. That’s the deflationary scenario.

Or of course, we can remain perma-flat while Goldilocks sits down and pigs out on the bears’ porridge again. That’s the obnoxious scenario (IMO).

As long as this and other inflation gauges are going sideways, she eats the tasteless gruel that is “just right”.

tip ief ratio

* Copper is by the way losing the daily SMA 50 today.

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